Excellencies, Ladies and Gentlemen
It is my great pleasure today to preside over the opening of the 2012 Cambodia Outlook Conference on the very timely and updated theme of ”Cambodia’s Priorities for Inclusive Growth, Regional Integration and ASEAN Leadership”. This is the sixth occasion on which I have had the pleasure of delivering the opening keynote address, and I would like to again congratulate CDRI and ANZ Royal Bank on their initiative in hosting this important annual conference, which brings together officials from the Royal Government, and senior representatives of the private sector, the research community, civil society and international development partners to consider Cambodia’s achievements and the challenges we face, and how we can work together to meet those challenges for the benefit of our nation.
This morning I would like to address the three related aspects of the conference theme – first the current state of the Cambodian economy and our socio-economic development, and why inclusive growth is so important to the government, the private sector and Cambodian communities, especially the young, the poor and the vulnerable; second, why regional integration, in our Greater Mekong Sub-region, in ASEAN and in the broader East Asian region is critical to achieving our growth and development aspirations; and finally, what Cambodia hopes to achieve as we assume the Chair of ASEAN for 2012 – for Cambodia and for our region.
Cambodia last held the Chair of ASEAN a decade ago, in 2002. As we assume this great honour and responsibility again in 2012, we do so in a very different world, in a very different region, and in a very different Cambodia. Overall, Cambodia and our region have been changed dramatically. Our Asian region is now at the centre of the global economy, with East Asia, and ASEAN at its core, the main driver of growth and economic prosperity. For instance, Cambodia experienced very high growth, which is a fundamental instrument for socio-economic development and poverty reduction, after the setback of the global financial crisis and economic downturn of 2008-9. This would result from sound macro-economic management.
As Cambodia assumes the Chair of ASEAN we are well placed to step up to meet the responsibilities of global and regional citizenship. We enthusiastically accept these responsibilities in both the chairing of ASEAN at a regional level, and in our quest to achieve a non-permanent seat on the Security Council of the United Nations at a global level.
Cambodia has made a strong and sustained recovery from the crisis, with a return to annual GDP growth of almost 7 per cent. Growth for 2011 has recently been revised upward from 6.4% to 6.9% of GDP. The future outlook for Cambodia is positive – the economy is projected to grow between 6% and 7% annually over the medium term. It is expected that Cambodia will benefit from future global investment and credit flows which will favours Asia due to the weakening of demand in the other parts of the world. The growth of the traditional US and EU markets could remain below its earlier trend at least for some time. With the growing regional cooperation and integration and faster growth of the Asian economies, Asian markets could offer more prospects of export and income growth to Cambodia. Thus, we have to diversify Cambodia’s economic structure to focus not only on serving the US and EU markets, but also Asian market.
International price for both oil and non-oil commodities continue to rise in 2011, partly in response to strong global demand and the situation in the Middle East, but also due to supply shocks for selected commodities. Despite that, in 2011, Cambodia’s inflation has maintained an annual average at around 5.5%. However, in the coming years, we need to carefully watch the inflation as rapid rise of regional inflationary pressures coupled with the hike in food and oil prices could have an adverse spillover into our domestic economy disturbing macroeconomic stability
Real sectors of Cambodian economy are on the strong path of recovery. Agriculture, which has maintained sound growth even during the crisis, in 2011 grew at around 3.3% slightly lower than 4% in 2010. Asia’s demand for agricultural products is set to grow rapidly. This would result with the prevailing high prices of food and persisting food security concerns. Price of raw materials for industrial use, for instance rubber, also expected to increase along with the increased trend of oil prices. The changing economic environment and its implications for food supply will likely also increase demand for agricultural products. Taking all this factors into account, the agricultural sector projected to maintain good performance in 2012 and in medium term. Agricultural product exports, including rice exports, are expected to increase owing to high priority has been given to this sector by the Royal Government.
Industry grew by 14.3% in 2011 as compared to negative growth of -9.5% in 2009 and positive growth of 13.6% in 2010. Main subsector, which underpins the growth in the industry sector, is the garment exports, which increased by 20.2% in 2011. Industry sector expected to grow robustly in 2012 as the textile exports projected to rise further as the result of the EU’s “Everything But Arms” initiatives, where Cambodian garment exports, as from 1st of January 2011, will be subject to 0% of customs duties (compared to 12% previously).
The services sector expanded to 5% of GDP in 2011, supported by good performance in the tourism sector. Tourists’ arrival into Cambodia increased by 15% in 2011 and reached around 2.88 million. In 2012, service projected to grow at around 5.7%. The government plans to develop a comprehensive tourism policy to transform the tourism industry to a high value added sector with linkages to the domestic economy.
Overall, the Cambodian economy is performing well. But we cannot afford to be complacent. The global economic and financial situation remains precarious, with particular concerns about the European debt crisis and the health of the European and US economies, both major trading partners for Cambodia. We must look to ourselves and to our region to strengthen and diversify our economy, to broaden our markets, and to deepen regional economic integration to protect ourselves from vulnerability to future external shocks.
The lessons of the GFC and its aftermath showed us the way forward if we are to achieve our aspirations overt the next decade – the maintenance of political and economic stability, the achievement of strong inclusive growth of at least 7% per annum, economic diversification to drive sustainable socio-economic development, further poverty reduction of 1% per annum, a GDP per capita of more than USD 1,000 by 2013 with the achievement of lower middle income country status, and graduation from aid-dependency,. To achieve these goals, Cambodia must focus on the following policy priorities:
- The further development of the agriculture sector, including production and export promotion, and agri-business, both for rice and other crops;
- The expansion of industrial manufacturing;
- The diversification of export products and regional markets;
- The attraction of high quality trade-oriented investment; and
- Human resource development to address the mis-match between skills and labour market demands.
Our primary goal is for a more diversified economic regime, through the strengthening of key export-oriented sectors such as agriculture and rural development, light manufacturing, private sector development, tourism, construction, energy and infrastructure, intra-regional trade and investment, and success as a major rice exporter to markets in Asia, Africa and the Middle East, along with the export of other crops, and associated food processing industries. Last month I stressed to a meeting of Cambodia’s diplomatic corps that I now see them as ‘Economic Ambassadors’ for Cambodia, working with us to create opportunities for quality trade and investment for Cambodia to support our national development goals.
We have to understand that why inclusive growth is so important for Cambodia. Inclusive growth means growth that is broadly based, across sectors, and with benefits for investors and businesses – large, medium and small enterprises, benefits flowing to large sections of the country labour force, benefits for both men and women, for the young, for the poor and vulnerable, and benefits to the government in terms of revenue collection to contribute to social development goals in poverty reduction and the delivery of health, education and social protection services.
The most critical factors in achieving inclusive growth for Cambodia will be – to strengthen our focus on agricultural development to improve livelihoods in rural Cambodia; to encourage the dynamism and productivity of our private sector, particularly small and medium enterprise, and associated foreign and domestic investment to support economic diversification; to create good jobs for our young population, and provide skills for young people merging into the labour market through enterprise and innovative public-private partnership based vocational education and training to bridge the gap we currently face between labour market needs and what we can supply.
We must also continue to work with the private sector to improve the business environment, using our anti-corruption legislation and the Anti-Corruption Commission to demonstrate to the nation, to investors and to the international community that we take anti-corruption measures seriously, and to improve the hard and soft infrastructure that is needed for efficient business transactions. We are committed to working to improve the management of economic land concessions to better promote productive investment and land use that benefits investors, local business and local communities.
The recent adoption of the government’s National Social Protection Strategy for the Poor and Vulnerable for 2011-15 will also contribute to ensuring that the benefits of growth and development flow to the poor and vulnerable through the provision of social protection and social safety net measures, and a continued effort to move people out of poverty through local community development, job creation and livelihood enhancement, and access to health, nutrition and education services for poor households.
Fundamental to meeting the challenges of economic diversification and inclusive growth will be the creation of productive jobs for our young population and the skills they need to succeed in those jobs. Much is already being done in the Technical and Vocational Education and Training sector in Cambodia that should be acknowledged and supported, in both state and private higher education and TVET institutions. I welcome the fact that some development agencies have recently made strengthening higher education and TVET a priority in their Cambodia country strategies in partnership with the government.
However, we must take measures to promote the quality and relevance of TVET to ensure that it is responsive to industry needs. Much of the most effective and high quality TVET is now being delivered within enterprises in particular sectors, for example finance and light manufacturing, with too little cooperation or sharing of models between the public and private sector. I encourage the public and private sector to work together to develop innovative approaches to public-private partnerships in TVET that draw on the experiences of successful local enterprise or sectoral models. We owe this to the many young Cambodians who each year enter the labour force and their aspirations for the future. Therefore, we have to work closer together for the future development of our nation.
The integration of Cambodia’s economy into our region will also be critical to our success. Cambodia’s strategic location in an increasingly integrated and ‘connected’ Greater Mekong Sub-region, in ASEAN and in our proximity to China, the world’s second largest economic power and the world’s largest market for agricultural surpluses is a major asset – for private sector development and investment, inclusive growth, socio-economic development and poverty reduction.
The Cambodian government has demonstrated its strong commitment to the realization of an ASEAN Economic Community by 2015. We have worked hard, through our maintenance of an open economy, and our compliance with WTO accession requirements and specific AEC requirements, to maximize our preparedness for AEC 2015. On the latest ‘AEC Scorecard’ Cambodia has achieved more than 70 per cent of the key deliverables required under the AEC, ranked third behind Singapore and Malaysia. We are currently also making progress in the computerization of cross-border trade and customs transactions to achieve further compliance but work still needs to be done in strengthening the institutional capacity of agencies responsible for the administration and good governance of cross-border trade, transport and people flows.
These efforts will better position Cambodia to reap the benefits of sub-regional and regional integration, while remaining an open economy seeking international opportunities for trade and investment both within and beyond our region. Within this view, as Chair of ASEAN we must lead by example and demonstrate, through our commitment to ASEAN Economic Community 2015 and deeper ASEAN and East Asian regional integration, that we accept both the opportunities and responsibilities that are involved, by showing that we have nothing to fear from openness and competition as we strengthen and diversity our economy and build our nation.
As we begin this year as ASEAN Chair may I express my congratulations and gratitude to the President of Indonesia and his team for their fine leadership of ASEAN in 2011. Much was achieved under their stewardship.
What is my vision for ASEAN and our priorities as Chair in 2012? Through our efforts this year, I would like to see an ASEAN that is stronger and empowered to work more effectively at both the regional and global levels, with a stronger commitment by its members, and better resources, with bigger roles for the ASEAN Secretary-General and the Secretariat as well as continuity between chairmanships. I believe ASEAN should be playing a more active role in the international issues and I will be stressing this message when I address the G20 summit in Los Cabos, Mexico on behalf of ASEAN in June.
I want to ensure that we maximize the achievement of an ASEAN Economic Community in 2015 and associated political-security and socio-cultural community, making our theme of “ASEAN: One Community, One Destiny” a reality, and ensuring that the peoples of ASEAN, especially its younger generation, understand and appreciate the value of our unique approach to regionalism and regional integration, and the strength it brings us as an influential regional voice in a challenging global environment.
On specific priority issues for ASEAN, I want to ensure that, through our work together in 2012, we build our capacity to sustain growth and achieve greater prosperity, economic integration, connectivity, and competitiveness, through the fulfillment of the ASEAN Economic Community, and by promoting domestic sources of growth and deepening regional cooperation, particularly through the ASEAN+3 processes, while remaining open to regional and global economic opportunities.
I want to achieve a greater role for the private sector in ASEAN processes and policy making, and better utilisation of the benefits of ASEAN Free Trade Agreements and bilateral trade and cooperation relationships.
I want to strengthen ASEAN as an institution and its resources, through both intra-ASEAN cooperation, and through resource partnerships with our regional and international dialogues partners.
I want to see ASEAN deliver on the ASEAN Charter commitment to alleviate poverty and narrow the development gap among between ASEAN and its LDCs (Cambodia, Lao PDR and Myanmar) through mutual assistance and cooperation, as well as reinvigorating domestic demand and boosting intra-regional trade.
I want to utilise the ASEAN Regional Forum, ASEAN+3 and East Asian Summit processes to promote cooperation, peace and security in the region, to prevent conflicts and resolve tensions, and to respect and safeguard the interests of both the big and small nations of our region, while at the same time working together on nuclear non-proliferation, anti-terrorism, and the prevention of human trafficking.
I want to work with our ASEAN partners and others in our region to support our ASEAN member nation Myanmar to achieve its aspirations and assume its rightful role in ASEAN and our broader region.
Cambodia is particularly well placed to play this constructive and responsible leadership role in ASEAN at this time, and through our responsible regional and international citizenship, to give back some of what we have received in support from our regional neighbours and the international community over the past two decades. We have positive and cooperative relationships – economic, strategic and people to people, with our ASEAN neighbours, our broader East Asian neighbours, China, North and South Korea, and Japan, and with other major players in our region such as the United States and Australia. I believe with our commitment and hard work this year we will be able to use these good relationships to strengthen ASEAN and achieve its goals.
And finally, today I am pleased to announce that, as Chair of ASEAN, Cambodia will initiate and host an ASEAN Global Dialogue, to be held in late 2012 following the East Asia Summit. I plan to invite the Heads of the major multilateral financial and development organisations, including the IMF, the World Bank, the Asian Development Bank, the United Nations and the WTO, to meet together to discuss how these agencies can work more effectively together with us in the ASEAN and East Asian region to pursue our shared goals of peace, stability, sustainable development and prosperity. As I said at the outset, in the past decade the world has changed, our region has changed, and Cambodia has changed. It is time for a new dialogue to better reflect and respond to the centrality of the East Asian region, with ASEAN at its core, in the global economy.
This is what I aspire to for Cambodia as we chair ASEAN in 2012. I look forward to working with my friends and colleagues in Cambodia, the nations of ASEAN, and its regional and global dialogue partners in achieving these aspirations.
Once again, I congratulate the organising partners of the 2012 Cambodia Outlook Conference, ANZ Royal Bank and CDRI, and look forward to receiving good policy recommendations and ideas for action generated by the conference.
To conclude, I now have great pleasure in declaring the 2012 Cambodia Outlook Conference open on “Cambodia’s Priorities for Inclusive growth, Regional Integration and ASEAN Leadership” and I wish the conference a success in exchanging views and dialogue on the future of Cambodia. I also wish Excellencies, Ladies and Gentlemen a success in your career.